The auctioneer’s starting to call it.
This is it. The moment you’ve been waiting for.
“Going once …”
“Going twice …”
Up goes your hand.
The crowd gasps and turns. All eyes are on you, the bidder who’s swooped from nowhere. This is exactly how you imagined it. Like a racehorse making a perfectly timed dash.
But wait …
Your heart starts thumping. Beads of sweat begin to form. Oh hell! Where did he come from? This wasn’t meant to happen!
The Terrible Auction Dilemma
So what should you do? Bid again? It’s tempting. Who knows, a few thousand might be enough. Or do “the sensible thing” and walk away?
Buying at auction is fraught with emotion. It’s one of the largest purchasing decisions you’re likely to make. And gambling when the whole process is designed to work against you is risky, to say the least.
But by following the experts’ approach to bidding at auction, you can put yourself in control – and win without overpaying.
Sound good? Let me show you how.
Know the Score Before the Auction
Research is vital. You must know the comparable property sales inside out.
For two reasons:
- To determine the property’s true value
- So that if the property gets passed in and you enter post-auction negotiations, you have evidence to support your price offer
By finding out what the market is doing, you can determine the likely buying range – from “great buy” all the way up to the “walkaway price”.
The only real way to research prices is to get out there and see first-hand all the options, good and bad. Attend auctions and note both the guide price and the eventual sale price.
To be in an educated position to judge value, you should look at 50-100 properties. It sounds a lot, but come auction day you can be confident you know exactly what the property is worth. And appearing confident is half the battle.
When it comes to research, buyers agents have an advantage through experience and being able to access real-time property data and reports. But there’s still a lot of free information which you can access simply by googling addresses.
Many mortgage brokers have professional data and valuation tools, too, so they may be able to run some basic sales reports for you.
And then there’s the most common way of researching: running “sold” searches on the major property portals like Domain and Realestate.com.au. However, it’s becoming increasingly common for agents and vendors to request sales data be kept private.
Next step: Armed with this research, determine your absolute walkaway price. This should be the point when even a cent more and you are happy to see the property sell to someone else. This is your “buyer’s remorse” failsafe.
Anticipate the reserve with an educated guess (put yourself in the vendor’s shoes). This will help determine your likely bid increments and when to slow down.
Check out Your Auction Enemies
Attend multiple auctions as practice and play along in your head. Can you keep up with the auctioneer? Can you identify the other buyers? Can you read their body language?
The easiest way to identify other buyers is to spot who’s holding a bidding card. But it also helps if you ask how many bidders have registered just before the auction begins.
With body language, it’s not so much the person with the bidding card to study as their partner. Do they look nervous? Often, as a bidder approaches their limit, they consult their partner more frequently. Smart bidders will reduce their increments here and immediately counter to keep the pressure on.
Some professionals will dress to try to intimidate. I’ve lost count of the number of people who think my clients have an unlimited budget and just give up, when really as professionals we are just bidding confidently up to our client’s limit and only withdrawing when we (or our client) no longer see value.
Set the Auction Pace
Choose a bidding strategy and stick to it.
Most professional bidders are deliberately aggressive and unemotional in their approach. They do this to unsettle others and crank up the pressure.
Inexperienced bidders often wait to the end and hope the property does not exceed their budget. This is fine if you ultimately have the deepest pockets. But adopting this approach is reactive and relies heavily on luck.
Having done your research and played along at “dummy run” auctions, you should be feeling confident. If that’s the case, being proactive in your bidding is the best way to go.
Why? Proactive bidding gives you a much better chance of winning because it allows you to:
- Knock out other buyers early to minimise competition
- Exert control by setting expectations
- Control bidding increments
- Misdirect and confuse other buyers with odd incremental increases
- Disrupt the auctioneer’s flow if the auction pace goes too fast too soon
The more you can get other buyers to think, the more uncertainty will creep in. And when people are uncertain they generally become indecisive and withdraw (even if they regret doing so later).
Ultimately, though, you can have all the tactics in the world but if someone else is prepared to bid higher, there is nothing you can do.
Beat Them at Their Game
Competition at an auction is everywhere: other buyers, the auctioneer, the vendor, the selling agents.
So on auction day, keep your cards close to your chest.
Unless you have a representative, no one cares about your best interests. The entire auction process is designed to take you out of your comfort zone, trip you up and put you under maximum pressure to get the highest price for the vendor.
Good auctioneers are seasoned performers whose humour is designed to lower your guard and make you lose focus. Their passion is “Sales 101” and designed to transfer enthusiasm. Even the pace and tone of their voice is by design to stir buyers’ emotions and create a feeling of momentum (even if there is none).
Find a position where you can see as much as possible. This will help you gain maximum control and more effectively play the person (whether it be other buyers or the auctioneer).
You Have the Upper Hand
So now you know how the experts approach auctions. Already you have a big advantage.
Many of your rivals won’t be so well prepared. Instead, they’ll be riding their luck, hoping and praying it’s their day. They could be about to give themselves financial nightmares for years to come.
But on auction day, with the finish line in sight, you can feel confident. You know the property’s true value. And you know how to run the race.
You’re in control.
And perfectly placed.